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FOR IMMEDIATE RELEASE
HONG KONG - FEBRUARY 24, 2012 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a+” of Meiji Yasuda Life Insurance Company (Meiji Yasuda) (Japan). The outlook for both ratings is stable.
The ratings reflect the company’s strong capitalization, improvement in profitability and positive top-line growth.
Meiji Yasuda's capital position remains adequate to support the current ratings. The company continues to make efforts to strengthen its capital base by raising core capital (Kikin), reducing risk assets and extending asset duration. In the first half of fiscal year 2011, the local solvency margin improved to 1,196.8% from 1,156.8% as at the end of fiscal year 2010. In terms of the new solvency margin that will be effective from the end of fiscal year 2011, Meiji Yasuda reported a 61.6 percentage-point improvement to 725.2%, compared to the end of fiscal year 2010.
The company reported a rise in its core operating profit in fiscal year 2010, mainly owing to the improvement in its interest margin. A continuing fall in the assumed interest rate and an increase in interest and dividend income boosted the company's core operating profit.
In fiscal year 2010, Meiji Yasuda reported a robust new sales (annualized premium equivalent) growth, owing to strong sales in the bancassurance channel. Meeting the demand for a more secure investment, the company concluded distribution agreements with more banks to increase its sales volume and provided these partner banks with sales support for whole life insurance. As a result, the sales mix in the bancassurance channel shifted from fixed annuities to whole life insurance, which led to an increase in profitability of the bancassurance channel.
Partially offsetting these positive rating factors are the pressure on capitalization from the weak stock market, the continuous decline in mortality and morbidity profits and the burden on investment income from persisting low interest rates.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of Pacific Guardian Life Insurance Company, Ltd. (Pacific Guardian Life) (Honolulu, HI), a wholly owned U.S. subsidiary of Meiji Yasuda. The outlook for both ratings is stable.
Pacific Guardian Life’s ratings reflect its strong stand-alone risk-adjusted capitalization, consistently profitable net operating performance and its favorable business profile as the largest life/health insurer in Hawaii. Additionally, Pacific Guardian Life’s ratings benefit from the financial strength and implicit support of its parent.
Offsetting these positive factors are its significant business and investment risks concentrated in Hawaii, the challenges to achieve critical mass in its core ordinary life and employee benefit segments, and its high level of direct mortgage loans relative to total capital.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding Universal BCAR”; “Understanding BCAR for Life/Health Insurers”; and “Risk Management and the Rating Process for Insurance Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.